Every four years, Bitcoin undergoes a programmed event called the “halving” — the block reward paid to miners is cut in half. This mechanism, built into Bitcoin by Satoshi Nakamoto in 2008, is one of the most important features of the cryptocurrency. It ensures that new Bitcoin supply gradually decreases over time, eventually stopping altogether when the total supply reaches 21 million. Halvings are scheduled events, but their impact on Bitcoin’s price has been profound.
The first halving occurred on November 28, 2012, reducing the block reward from 50 BTC to 25 BTC. At the time, Bitcoin was trading around $12. Over the next year, Bitcoin rose to over $1,200 — a 100x increase. The second halving occurred on July 9, 2016, reducing the reward from 25 BTC to 12.5 BTC. Bitcoin was at $650. Over the following 18 months, it reached $20,000 — a 30x increase. The third halving occurred on May 11, 2020, reducing the reward to 6.25 BTC. Bitcoin was at $8,500. Over the next year, it reached $69,000 — an 8x increase.
Each halving has been followed by a major bull market. This consistent pattern has led some analysts to propose a model called “Stock-to-Flow,” which predicts Bitcoin’s price based on its scarcity. The model has been surprisingly accurate across multiple halvings. Critics argue that the model is a coincidence or a self-fulfilling prophecy, but believers point to its track record as evidence that Bitcoin’s price action is predictable over long timeframes.
Whatever the mechanism, the halvings have reinforced Bitcoin’s narrative as “digital gold.” Gold is valuable in part because its supply grows slowly and predictably — the total gold supply increases by about 1.5% per year. Bitcoin’s halvings progressively reduce its supply growth rate. Before the first halving, Bitcoin’s annual inflation was about 25%. After the 2024 halving, it was below 1%. Bitcoin was becoming harder money than gold itself.
The fourth halving occurred on April 20, 2024, reducing the block reward to 3.125 BTC. Bitcoin was at $64,000 at the time. In the months that followed, the Bitcoin ETFs continued absorbing supply while the halving reduced new issuance. By late 2024, Bitcoin crossed $100,000 for the first time. The halving cycles will continue until roughly the year 2140, when the last Satoshi will be mined. By then, Bitcoin will have completed one of the most elegant monetary experiments in history — a currency with supply perfectly predictable and ultimately finite.
Leave a Reply